14 August, 2020 / IN Business Advisory / by Chad Stead
Are concerns about your businesses cash flow keeping you awake at night? Are you unsure how many items, widgets, covers, appointments you need to sell so you can cover your costs? A financial action plan can help in uncovering the answers.
Now more than ever understanding the cash flow requirements of your business is critical. If you have received and benefited from the following grants, subsidies, or concessions, it is time that you consider planning how your business will cope when the tap is turned off:
- PAYG cash flow boost
- Suspension of ATO payment arrangements
- Suspension of principle loan repayments by your lender
Financial Action Plan
A financial action plan is a combination of management tools which include budgeting, breakeven and forecasting. These tools are considered fundamental financial practices for any businesses, particularly those that are currently subject to the generous government concessions. When applied collectively, these tools assist in managing cash flow, assessing when to acquire or maintain equipment, paying creditors and staff, reinvesting after-tax profits and covering operational expenditures.
According to a recent survey undertaken by Jirsch Sutherland, 36% of respondents cited cash flow and turnover as the key cause of their stress. Maybe because of not understanding what their businesses needs were?
Creating a budget, analysing the breakeven income position of your business, and generating forecasts are essential for a financially healthy business.
Pressure Testing Your Business
Another useful tool to manage your business is by pressure testing it. Pressure testing works by using some key metrics and applying ‘what if’ scenarios to the financial data. For example:
- What impact does increasing the price of your products have on both cash flow and operating profit?
- What about increasing sales volume?
- What about reducing your receivables days?
- And what about reducing your inventory?
Scenario planning is a powerful tool that can be used to assess the merit in making decisions before implementing them.
We have found that more and more clients are interested in these types of business advisory services. Our team will invest the time to ask the right questions, understand the pain points of your business, and dig deep where necessary to achieve the optimal outcome.
We’re Here to Help
Our message has been clear from the outset and consistent across all correspondence – if you are clear, calm, and have a plan, you will have a competitive advantage over most businesses.
Lambourne Partners is here during these difficult times to support and provide guidance to you and your business. Lambourne Partners is an integrated advisory practice offering a full range of services to our clients. We thrive on helping owners better understand their businesses and their personal wealth through the numbers.
If you’re interested in understanding more about how we deliver our financial action plan or curious to pressure test your business, please contact use below to find out how we can help and plan the next steps.